£15K Cash ISA Limit Fails to Ignite Savings Industry
Personal_Finance / ISA's Sep 24, 2014 - 06:00 PM GMTBy: MoneyFacts
Not even the biggest hike in tax-free allowance since the launch of ISAs has stirred the savings market from its apathy. Moneyfacts.co.uk can reveal that the ISA sector has remained largely subdued and the majority of rates have actually fallen further since the increased allowance was announced.
The average no notice cash ISA rate fell in August to reach a new low of 1.17%, the fifth consecutive monthly drop and the lowest rate seen since Moneyfacts began recording this measure in 2007. The average of the notice ISAs saw a very marginal increase in rate of 0.01% to stand at 1.30%; however, this is still one of the lowest rates seen in the last 12 months.
Both rates have fallen substantially since April - the height of the traditional ISA season - being down by 0.07% and 0.16% respectively. Fixed cash ISA rates have also fallen since April, and although they posted slight increases in August, the average one-year fixed ISA has dropped by 0.08% in the last five months.
The increased allowance has also failed to boost the number of ISA products available. There are currently a total of 283, which is the lowest number seen in the last 12 months, and a far cry from the 403 products on offer in 2012, prior to the launch of the Funding for Lending Scheme (FLS).
Sylvia Waycot, Editor at Moneyfacts.co.uk, said:
“The fall in average cash ISA rates to the lowest level since 2007 clearly shows just what little impact the new allowance has had.
“Rather than reinvigorating the savings market with a raft of new products, improved competition and higher rates, the launch has to all intents and purposes been a flop.
“Provider apathy has got to be the key driver behind this contracting, and lower-rate, market as they don’t want or need savers money, and a tax-free wrapper makes it no more palatable.
“Savers are still paying the price for FLS and rates have not returned to the previous highs which saw the average one-year fixed ISA paying 2.94% – almost double the 1.51% of today.
“What had the potential to be the biggest ISA season since the account’s launch has failed to have a significant impact – it’s now two months since the allowance was introduced and rates are still at historically low levels, product numbers continue to fall and the ISA market as a whole remains subdued.
“Despite the hype surrounding the new allowance, it’s as though providers have decided to just sit this one out.”
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